BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1449
                                                                  Page  1

          Date of Hearing:   August 8, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                  SB 1449 (Calderon) - As Amended:  August 6, 2012 

          Policy Committee:                              InsuranceVote:12 
          - 0 

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          This bill permits life insurance policies to include premium and 
          surrender charge waivers triggered by specified medical 
          conditions. Specifically, this bill: 

          1)Allows a life insurance policy owner who is totally disabled 
            to qualify for a waiver of premium on a life insurance policy.

          2)Permits life insurance contracts to include definitions of 
            total disability that include presumptive total disability for 
            the total loss of sight, hearing, speech, use of hands or 
            feet.

          3)Requires total disability to continue for a consecutive period 
            of time specified in the contract to qualify for a premium 
            waiver.

          4)Permits the life insurance policy to exclude total disability 
            injuries that were self-inflicted or resulted from reckless or 
            illegal conduct.

          5)Establishes minimum standards for the duration of a premium 
            waiver for total disability.

          6)Permits life insurance and annuity contracts to include 
            provisions for waiving surrender charges if the owner, 
            insured, annuitant, or beneficiary:

               a)     Develops a terminal condition.  
               b)     Receives home or community based services on 
                 prescription of a physician.








                                                                  SB 1449
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               c)     Becomes totally disabled.
               d)     Develops a chronic illness that results in a 
                 permanent inability to perform activities of daily 
                 living.
               e)     Becomes unemployed.

           FISCAL EFFECT  

          Increased workload for CDI associated with increased reviews and 
          refilings would likely cost approximately $135,000 in 2012-13, 
          growing to $195,000 in 2013-14.  On-going costs would likely be 
          in the range of $140,000 per year. (Insurance Fund)

           COMMENTS  

           1)Purpose  . The intent of this bill is to streamline the process 
            for approval of special features for life insurance and 
            annuity products that may provide consumers with resources 
            during difficult times, including a waiver of premiums during 
            periods of disability and a waiver of the surrender charge if 
            the insured suffers specified serious medical conditions, 
            disability, or unemployment.  These features are commonly 
            available in other states, but are not available in California 
            under existing law.  

           2)Surrender Charge Waiver  .  Permanent life insurance, such as a 
            whole life policy, accrues a cash value (which is different 
            than the amount paid to a beneficiary if the insured dies) 
            over time and provides life insurance protection as long as 
            the premiums are paid.  The policy owner can surrender a life 
            insurance policy for cash value, but generally must pay a 
            surrender charge for doing so if the surrender occurs within a 
            time period established in the policy (commonly 7-10 years 
            from the issuance of the policy or annuity).  Annuity 
            contracts also have cash value and impose surrender charges on 
            a similar basis.   



           Analysis Prepared by  :    Julie Salley-Gray / APPR. / (916) 
          319-2081 












                                                                  SB 1449
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